Tomori joined the Rossoneri on an initial loan with the option to sign in January and he made his debut in a fiery Coppa Italia clash with derby rivals Inter Milan, which saw Milan striker Zlatan Ibrahimovic red carded.
"AC Milan is delighted to announce the exercising of the option for the permanent transfer of Oluwafikayomi Oluwadamilola Tomori from Chelsea," a club statement read. "The English defender, who made 22 appearances and scored one goal over the last season, will continue to play with the Club until 30 June 2025."
Having made just one Premier League appearance for Chelsea in the first half of the campaign, Tomori established himself as a mainstay in the Milan backline as he played 17 times in Serie A, with Stefano Pioli's side returning to the Champions League for the first time since 2014.
The highlight for the 23-year-old was his standout performance in Milan's stunning 3-0 victory away to Juventus, where he scored a towering header for the game's third goal -- and his first for the club.
Milan was the fourth loan of Tomori's career, having made his Premier League debut for Chelsea in 2016.
He spent time at Brighton & Hove Albion, Hull City and Derby County before establishing himself as Chelsea first-team player in the 2019-20 season, where he made 22 appearances in all competitions. Tomori also made his England debut in 2019.
Despite leading the Serie A table for much of the campaign, Milan finished the season in second place, but secured Champions League qualification on the final day.